“When you see financials leading, you’ll generally see yield-curve steepening as well. So there tends to be this consistency that occurs within and across asset classes as opposed to this idea that there’s just one single thing to focus on.”

Things could turn very ugly in the market if the recent sector trends get worse, he notes, adding that nobody’s looking for a real meltdown here.

“And because nobody’s really prepared for it, that may be why it could happen. It doesn’t mean it’s guaranteed to happen, but at least the odds are higher when less people are looking for it.

So what would it take to turn the market positive again? “You need to see the right areas leading, and that’s really in the cyclical space,” Gayed maintains.

“You need to see those areas which are most sensitive to global growth get a better bid. Those are emerging markets, those are industrials, materials, energy.” A strong move up by small-cap stocks would help too, he adds.

“If you see those trends start to pick up, that becomes something that you can play for a bull move,” Gayed says. “But right now, again, I have to caution, inter-market trends are saying that is not the case.”

The Standard & Poor’s 500 Index generated a total return of 16 percent last year and has risen 6.4 percent so far in 2013.

Pension Partners likes to rotate between stocks and bonds, without parking much money in cash for extended periods.

For example, when stocks tumble, it’s usually in a deflationary environment, Gayed explains.

“Deflationary scares tend to be very good momentum-wise for bonds. So it’s better, in our judgment, to rotate into bonds during those risk-off periods rather than cash, because at least there’s the potential to gain from that environment.”